What are the consequences of increasing the money supply?

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The consequence of increasing the money supply is generally an increase in economic activity.  This effect can be muted if banks refuse to lend and if firms are reluctant to borrow.  However, an increase in the money supply generally leads to an increase in economic activity.  This is why central banks try to increase the money supply during times of recession.

When the money supply is...

(The entire section contains 203 words.)

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